CEO Advisor Newsletter December 2021
Drive Growth Through Acquisitions
- CEO Advisor, Inc. works with CEOs and business owners to accelerate growth - both organically and through strategic, opportunistic acquisitions. As a business advisory and mergers and acquisitions (M&A) advisor with decades of experience, we guide you through every step of the detailed process.
- For small and middle-market companies, finding a great acquisition target takes focus, commitment and expertise. Finding great acquisition targets also requires a disciplined approach, experience, time and finesse.
- A proactive acquisition search identified through a strategic acquisition process has a high probability of success. Given some acquisitions are not successful long-term, we will define success with respect to acquisitions as, A) Defining the type and size of target companies, B) Your goals and why you are seeking to acquire a company(ies), C) A properly negotiated Letter of Intent (LOI), D) Efficient and successful Due Diligence process, E) Deal closure at the agreed upon price/terms, and F) Achievement of effective post-acquisition integration.
- Implementing a Strategic Acquisition Process
- Strategic acquisitions take a real commitment, but are doable by most any company given the right team in place. Most small and middle-market companies that pursue acquisitions on their own miss real opportunities due to a lack of a process, experience and the right team of advisors. Most companies tend to overpay for acquisitions so having a defined, disciplined process with a seasoned M&A advisor coupled with a corporate/transaction attorney and a CPA/tax advisor is extremely important.
- Here are the most important steps:
- Define your acquisition strategy
- Define your investment criteria and budget
- Build the acquisition target list
- Begin target outreach
- Gather information on interested parties
- Secure introductory conference calls and meetings
- Gain additional information to compose a Letter of Intent
- Negotiate the Letter of Intent
- Perform Due Diligence
- Draft and negotiate legal documents
- Close the transaction
- Post-acquisition integration
- What is the maximum size company you are comfortable acquiring?
- What is the minimum size company you might acquire? Buy too small and you'll incur a high relative cost to getting the deal done.
- Do you have a minimum profitability hurdle in mind?
- What types of synergies do you expect from acquiring a company in this industry segment?
- What products or services will be the primary focus of your first acquisition?
- What geographic expansion do you want to achieve from each acquisition?
- What technologies are compatible or incompatible as part of your acquisition search?
- What management positions, if any, do you seek out from an acquisition?
- Are you interested in eliminating a competitor, while acquiring customers for growth?
- Who will be the acquisition team, internally and externally?
- What will be the source of funds for acquisitions?
- Do you have a banking relationship as a primary source of funds?
Negotiations in acquiring a company are extremely different from any other negotiations given the seller has built the business from the ground up and is typically a once in a life-time event. With the right M&A advisor, you will feel completely comfortable pursing strategic, opportunistic acquisitions.
CEO Advisor, Inc. has the expertise and experience to help you through this challenging process. Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.
Using Your Budget to Drive Greater Sales and Profits
- This is a critical time of the year for planning and budgeting. Your Budget should be a working plan that is used on an on-going basis. It should be used proactively on a monthly basis to limit and track Costs and Expenses in all areas of your business. More importantly, it should help you to focus on and drive sales monthly.
- If you haven't completed your 2022 Budget, you should consider gaining help from a business advisor who is willing to take the time and provide the expertise to create financial goals for your business to maximize your Net Profit.
- 1. Drive Sales
- Your Budget should be a set of monthly financial goals to drive Sales. By bringing added focus to your monthly sales goals, your Budget should be a roadmap for your sales team. This Sales Budgeting process will also focus you on looking at the quality of your sales team, needed sales coverage, sales goals and other sales related goals and needs.
- 2. Costs vs Expenses
- Costs are directly related to creating your products or servicing your customers, such as materials, direct labor, customer support, etc. Sales minus Costs equal your Gross Profit. Expenses, on the other hand, are general and administrative, sales and marketing related, such as executive salaries, rent, trade shows, sales salaries and commissions, etc. Properly tracking your Costs and Expenses against your 2022 Budget is critical to maximizing Net Profits.
- 3. Monitor Your Budget on a Regular Basis
- Even when the trend is exactly where you want it to be, don't give up the regular habit of monitoring Sales, Costs and Expenses against Budget. This requires monthly accountability on your part and the part of your managers. Meet with your management team each month and quarter to review your Financial Statements and reinforce the discipline needed to keep Costs and Expenses within Budget.
- 4. Give Budget Authority to Managers
- A critical element in accountability and success is assigning responsibility for bottom line results. At the beginning of each month, identify the amount of money budgeted for each department and ask the department manager to create a list of priorities along with anticipated Costs and Expenses. Then, each month check the results of their expenditures against the amounts budgeted. You can create an incentive program or bonus plan for those who come in under your Budget or exceed Net Profit goals.
- 5. Use Purchase Orders
- Whether in the corporate world or the world of small business, it is human nature to spend all the money in the Budget because there is always some marketing idea to squeeze in or some piece of equipment to upgrade or replace. Be disciplined and resist that urge. Require signed Purchase Orders, approved by the Department Manager, an Executive for large purchases and the Accounting department. Purchase Orders can be a critical aspect of pre-approving expenditures, holding your team accountable to the Budget, staying on Budget and meeting your Net Profit goals.
- 6. Planning, Budgeting and Forecasting
- To grow your business profitably or avoid a cash flow crisis, you must be proactive and smart. Create a brief Business Plan to plan, focus your time and your business strategy. Create a monthly Financial Forecast with goals and use it as a disciplined Budget to drive Sales, and monitor and cut Costs and Expenses.
- 7. Be Prepared to Sacrifice
- A healthy business can create a great return and reward you and your employees with tremendous growth opportunities. Don't make the mistake of choosing short-term satisfaction at the risk of long-term stability. Consult an expert business advisor to assist in the above critical steps - this can be the difference in making it through a crisis or achieving your Net Profit goals. Planning, forecasting, budgeting and cost controls require specialized expertise.
- CEO Advisor, Inc. can assist you in business planning, forecasting and keeping your monthly spending within Budget, while continuing to maintain growth and productivity. Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.